MANILA - The economy grew 6.8 percent in the first 3 months of the year, meeting analysts' expectations, but at the same time reflecting faster inflation that slowed consumer spending.
Without the effects of inflation, real gross domestic product growth in the first quarter would have fallen "well within" the full-year goal of 7 to 8 percent, Socioeconomic Planning Secretary Ernesto Pernia said.
"Inflation is the spoiler. That is why we need to really focus on inflation, especially because it is the number one concern expressed by Filipinos in surveys," Pernia told reporters.
The government needs to "address sources of rising inflation" even as the uptick in prices will "gradually ease this year," Pernia said. Mitigating measures such as unconditional cash transfers to the poor should be hastened, he said.
The Bangko Sentral ng Pilipinas is expected to raise the benchmark borrowing rate by 25 basis points later Thursday after inflation in April reached 4.5 percent, the highest in over 5 years.
It was the tenth consecutive quarter that the Philippines posted growth of at least 6.5 percent, Pernia said.
The country also matched the 6.8-percent expansion in China, exceeded Indonesia's 5.1 percent but was behind Vietnam's 7.4 percent, he said.
Pernia said higher consumer prices due to tax reform would be "transitory" and spending would recover within the year.
The first package of tax reform slashed personal income tax rates, increasing the take-home pay of the middle class. However, duties were also raised on fuel, sugar-sweetened drinks and cars.
Industry grew 7.9 percent, backed up by manufacturing and construction. "This indicates that our 'Build, Build, Build' program is gaining ground," Pernia said.
President Rodrigo Duterte plans to build up P8 trillion in new infrastructure to accelerate economic growth.
"This performance demonstrates that we have formally laid the groundwork for reforms in some of the sectors of the economy," Pernia said.
The services sector was the main growth driver in the first quarter, contributing 4 points to the over-all growth rate. The sector grew 7 percent during the period, according to ABS-CBN Data Analytics.
Industry grew at the fastest clip, 7.9 percent, boosted by construction and manufacturing, which expanded by 9.3 percent and 8 percent, respectively.
Growth in agriculture slowed compared to last year. The sector had grown for five consecutive quarters.
Household consumption and investment were the principal drivers of growth on the demand side, each contributing 3.9 percentage points.
Consumption growth slowed while the 12.5-percent expansion in investment was the fastest in more than a year.
Government expenditure accelerated for the fourth straight quarter, expanding by 13.6 percent.
Growth in exports was the slowest since the second quarter of 2015, while the uptick in imports was the slowest since the third quarter of 2014.
-- with a report from ABS-CBN Data Analytics